Section 38: May be Converted into Higher Class of Bank or Financial Institution

1) If a bank or financial institution of the lower class desires to be converted into a bank or financial institution of one level higher class, it has to submit an application to the Rastra
Bank.
Provided that the class “D” institutions may not be converted into the higher class.

2) If the Rastra Bank deems it appropriate, upon carrying out an inquiry into the application and details enclosed with the application according to sub-section (1), to convert the bank or financial institution as the bank or financial institution of higher class, it may grant prior approval subject to the following terms and conditions:-

(a) If it has met the paid-up capital requirement for a bank or financial institution of higher class as prescribed by the Rastra Bank,

(b) If it has continuously maintained the capital fund adequacy according to the Rastra Bank directives for the last five years, it has been in profit continuously for the last five years, and the average non-performing loans of the last five years have been within the limits as prescribed by the Rastra Bank,

(c) If preliminary expenses have already been written off,

(d) If the shares to be issued publicly have been issued and already been allotted,

(e) If the General Meeting has already passed the special resolution for conversion into the upper class of the bank or financial institution,

(f) If it has met all conditions as prescribed by the Rastra Bank.

3) The Rastra Bank shall issue the license of upper-class bank or financial institution pursuant to this Act, causing amendment to be made to the Memorandum of Association and Articles of Association of the bank or financial institution according to prevailing law having obtained prior approval pursuant to sub-section (2).